Wednesday 1 March 2017 2:00 am

Food prices are increasing at the fastest rate for two and a half years

Food prices are increasing at the fastest rate for two and a half years as the fall in the value of sterling has forced supermarkets to pass on some of their costs to shoppers.

Prices for food rose 0.4 per cent year-on-year in February, according to figures from Nielsen and the British Retail Consortium (BRC). Overall shop prices fell by one per cent, however, due to a 1.8 per cent deflation of prices on non-food items.

Read more: Over 5,500 UK restaurants face risk of going bust as food imports cost more

Global food prices increased 16 per cent over the past year, and the found fell by about 15 per cent, pushing up costs for retailers. Helen Dickinson, chief executive of the BRC, said a food price rise of just 0.4 per cent for UK consumers showed retailers were "managing to largely shield consumers from cost increases".

Competition in food retailing is fierce, as the mainstream supermarkets are constantly trying to keep market share by offering the cheapest groceries.

Read more: Manufacturing giant Premier Foods considers price rises due to Brexit vote

However, suppliers are putting up prices. Last year, Unilever and Tesco had a very public spat about price rises. It later emerged that Premier Foods, the company behind Mr Kipling cakes, and Arla Foods, the milk giant that makes Anchor and Lurpak butter, were both charging supermarkets more for their goods.

Retail Economics has forecast that these cost pressures will mean food price inflation hits three per cent this year, and that this is likely to lead to customers buying more own-brand products, or switching supermarkets.

Richard Lim, chief executive of Retail Economics, said rising food bills will be the first "Brexit impact" for many. 

"Rising food inflation will be one of the areas families feel the pinch first and with many households 'just about managing', discretionary spending power will come under intense pressure — especially for the least affluent," he said.